Educational purposes only. This content does not constitute investment advice. Read our disclaimer
StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Housing's "golden handcuffs": homeowners who locked in very low mortgage rates (many near 3% during the pandemic) are reluctant to sell, because moving means swapping that cheap loan for one at today's much higher rate. The result is frozen inventory and low sales volume.
Why It Matters
The lock-in effect is the main reason the housing market can "feel frozen" without a price crash: owners with cheap loans simply don't list, so supply dries up and transactions slow. The Mortgage Bankers Association estimated it kept over a million homes a year off the market. (Different from an IPO "lockup," which restricts insiders from selling new shares.)
Key Points
- "Golden handcuffs" — a cheap old mortgage vs an expensive new one keeps owners from selling.
- Freezes inventory and sales volume without necessarily crashing prices.
- Eases as more owners come to hold rates near the current market rate.
Related Terms
Common Questions
Housing's "golden handcuffs": homeowners who locked in very low mortgage rates (many near 3% during the pandemic) are reluctant to sell, because moving means swapping that cheap loan for one at today's much higher rate. The result is frozen inventory and low sales volume. The lock-in effect is the main reason the housing market can "feel frozen" without a price crash: owners with cheap loans simply don't list, so supply dries up and transactions slow. The Mortgage Bankers Association estimated it kept over a million homes a year off the market.
The lock-in effect is the main reason the housing market can "feel frozen" without a price crash: owners with cheap loans simply don't list, so supply dries up and transactions slow. The Mortgage Bankers Association estimated it kept over a million homes a year off the market. (Different from an IPO "lockup," which restricts insiders from selling new shares.)
"Golden handcuffs" — a cheap old mortgage vs an expensive new one keeps owners from selling.
Freezes inventory and sales volume without necessarily crashing prices.
Eases as more owners come to hold rates near the current market rate.